Gavin Brown of the University of Liverpool believes that the UK parliamentary committee's proposal to regulate cryptocurrency as gambling highlights underlying issues with understanding and regulating the technology.

The suggestion made by a UK parliamentary committee last month to regulate cryptocurrency as gambling was promptly rejected by the Treasury; however, Gavin Brown, associate professor in financial technology at the University of Liverpool, believes that the mere proposal of such regulation is indicative of certain underlying issues.

According to Gavin Brown, associate professor in financial technology at the University of Liverpool, the UK parliamentary committee's lack of understanding regarding cryptocurrency is a common issue, as even people in positions of power and influence, such as the CEOs of multinational banks, often have less knowledge of the technology than individuals from non-financial backgrounds; this is due to the fact that cryptocurrency is a powerful and complex technology, as evidenced by the largest ever Bitcoin transaction, which was worth over $US1 billion and was cleared and settled within minutes without the involvement of a bank, but required a transaction fee of $US3.56.

According to Gavin Brown, the lack of knowledge and understanding of cryptocurrency in Western Anglo-Saxon economies is a dangerous situation, as this technology is not going away and poses a constant threat.

Intentional targeting and malevolent exploitation.
The regulation of cryptocurrencies, which include thousands of different digital currencies with Bitcoin being the largest, is a complex issue due to their decentralized nature. While larger crypto companies are centralized and operate like traditional companies with shareholders and a board of directors, cryptocurrencies are not. This makes it difficult to control or ban them in a conventional sense, as they lack a CEO, head office, employees, email address, buildings, AGM, and shareholders. According to Gavin Brown, Bitcoin is essentially an idea and a computer program that is being run globally, making it elusive and hard to regulate. However, this very elusiveness is a fundamental aspect of cryptocurrencies.

According to Gavin Brown, cryptocurrency has been intentionally designed to be resistant to state control and regulatory oversight, making it difficult for regulators to exert any influence over it.

One of the numerous drawbacks associated with cryptocurrency is its potential for malevolent exploitation by criminals, as stated by Gavin Brown. John Reed Stark, a Washington DC-based attorney who specializes in the intersection of law and technology, also highlighted the issue in an interview with ABC's Four Corners last year. He noted that cryptocurrency has made it easier for criminals to commit heinous crimes such as ransomware attacks, terrorism, sanctions evasion during wartime, drug trafficking, and sex trafficking.

Natasha Gillezeau, who serves as the SXSW Sydney production lead and previously worked as a tech journalist for the Australian Financial Review, believes that people need to comprehend the gravity of cryptocurrency. She explains to ABC RN's Download This Show that crypto companies have made an extensive marketing and advertising push in recent years, with sponsorships of sports stadiums and outreach to influencers being just a few examples. Gillezeau notes that the marketing and advertising industry has played a significant role in legitimizing cryptocurrency. In fact, she has been privy to conversations where individuals have stated that they deliberately target people with gambling problems on Facebook and Instagram with crypto ads because they are more likely to invest impulsively.

"Very different to gambling"
Although Gillezeau is not convinced that the UK's gambling regulation proposal is the optimal solution to the cryptocurrency issue, she acknowledges that it acknowledges the impact of cryptocurrency on individuals. She suggests that the proposal may be a response to specific groups of people who have been inundated with cryptocurrency-related advertising, resulting in significant financial losses. The British MPs who raised the proposal may be attempting to address this issue.

If cryptocurrency trading were classified as gambling, platforms may be subject to supplementary licensing regulations, stake limits, and stricter control of advertising to safeguard vulnerable users. Gavin Brown acknowledges that there may be some rationale behind aligning cryptocurrency use with gambling regulations.

According to Gavin Brown, cryptocurrency has the potential to defraud people and cause significant financial losses, which is similar to gambling. Therefore, labeling cryptocurrency trading as gambling may be a quick and prudent solution that caters to the downside risk agenda. Additionally, regulators can use existing laws to regulate cryptocurrency trading. However, Brown believes that this approach overlooks the unique characteristics of cryptocurrency. Unlike gambling, cryptocurrency does not involve a house and punter, and the nature of the technology is more nuanced. Therefore, Brown suggests that regulating cryptocurrency trading requires a more nuanced approach that acknowledges its distinct features.

"Can't afford to get left behind"
In Australia, approximately one million individuals owned cryptocurrency by mid-2022. Meanwhile, in the UK, one in nine individuals, equivalent to 5.2 million people, have either owned or used cryptocurrency. Gavin Brown notes that this significant adoption of cryptocurrency has occurred in just 13 years. He then poses a question regarding the future: what if the number of cryptocurrency users in the UK increases to 30 or 40 million in the next decade?

Gavin Brown raises a hypothetical scenario where every British or Australian citizen decides to seek an alternative to traditional money due to concerns regarding inflation, interest rates, or government control. In such a situation, Brown suggests that individuals may turn to cryptocurrency as an alternative form of money, which is accessible through an internet connection.

Gavin Brown argues that the greater the adoption of alternative currency, the more challenging it becomes to regulate and control the economy. If people stop using traditional currency, the government's ability to control the economy is significantly reduced. Brown recalls being asked a question by a UK Treasury representative six years ago regarding who would finance essential services such as schools, roads, and defense if cryptocurrency became widely used. Brown acknowledges that this is a critical issue that needs to be addressed. For many years, cryptocurrencies and digital assets have been treated with caution, and there has been a tendency to ignore their potential impact on the economy.

Gavin Brown acknowledges that despite the desire of nation-states for cryptocurrency to disappear, it continues to gain traction. He emphasizes that countries like the UK and Australia cannot afford to be left behind, given the importance of financial services to their respective economies. Brown suggests that governments must develop an effective digital strategy to address the challenges posed by cryptocurrency. While regulating cryptocurrency itself may be challenging, Brown believes that it is possible to regulate the individuals and companies that interact with it. For instance, a company that identifies as a cryptocurrency bank can be regulated similarly to a bank of a digital asset. Similarly, prime brokers, custodians of Bitcoin, and financial advisers of digital assets can be regulated as traditional companies and individuals. Brown views this approach as a more practical solution.